According to Pakistan’s “Express Forum” report on January 13: The second phase protocol of the China-Pakistan Free Trade Agreement officially came into effect on January 1, 2020. This is the second phase of the bilateral free trade agreement following the first phase. This is another major step in China-Brazil economic and trade cooperation 15 years after the implementation of the trade agreement. China is currently Pakistan’s second largest export destination and largest source of imports, accounting for 8% of Pakistan’s export share and 29% of its import share. Since the first phase of the free trade agreement came into effect, bilateral trade volume has increased from US$2.2 billion in 2005 to US$15.6 billion in 2019. However, because 75% of Pakistan’s exports to China are concentrated in a few products such as cotton and rice, it has led to The export deficit is large. According to statistics, Pakistan’s trade deficit with China in fiscal year 2019 was US$10.89 billion, accounting for 34.22% of Pakistan’s total trade deficit.
In this new agreement, China will grant Pakistan market access on par with ASEAN member states, which is an important benefit to Pakistani exporters. According to estimates by Daoud, Commercial Advisor to the Prime Minister of Pakistan, Pakistan’s exports are expected to increase by US$500 million within the first year after the second phase of the free trade agreement comes into effect. Seizing the new opportunities brought by free trade agreements requires the government and private sector to work together to reduce production costs, enhance industry competitiveness, and at the same time strengthen product brand building and international marketing. At the same time, due to the elimination of tariff barriers and the depreciation of the renminbi, Pakistan will also benefit from the export of agricultural products and the import of high value-added products. In order to ensure export growth, Pakistan should focus on the following three aspects: First, pay close attention to the impact of tariff reduction on products to avoid trade diversion. Secondly, accelerate the construction of Special Economic Zones (SEZ) under the China-Pakistan Economic Corridor (CPEC) to ensure that investment from China can flow smoothly into Pakistan and promote industrial development. Third, reduce internal trade barriers, improve the business environment, improve infrastructure construction, avoid multiple taxes, curb energy price increases, and improve research and development capabilities.
